PART I FINANCIAL INFORMATION Item 1. Financial Statements Kforce Inc.'s Q1 2024 unaudited condensed consolidated financial statements are presented, showing a year-over-year decline in key financial metrics | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $351,889 | $405,997 | | Gross profit | $95,250 | $113,976 | | Income from operations | $15,727 | $23,403 | | Net income | $10,987 | $16,210 | | Earnings per share – diluted | $0.58 | $0.82 | | (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $246,175 | $244,459 | | Total assets | $366,333 | $357,979 | | Total current liabilities | $106,104 | $102,975 | | Total liabilities | $201,828 | $198,899 | | Total stockholders' equity | $164,505 | $159,080 | | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $13,169 | $19,056 | | Cash (used in) provided by investing activities | $(2,404) | $2,437 | | Cash used in financing activities | $(10,778) | $(21,443) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, segment performance, revenue disaggregation, and credit facility compliance, highlighting the Technology segment's primary role - Quarterly operating results are affected by billing days, seasonality, and holiday/vacation schedules, with the first quarter typically experiencing higher costs due to U.S. employment tax resets, adversely affecting profitability26 Segment Revenue | Segment Revenue (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Technology | $322,084 | $364,844 | | FA | $29,805 | $41,153 | | Total | $351,889 | $405,997 | Revenue by Type | Revenue by Type (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Flex revenue | $344,724 | $395,532 | | Direct Hire revenue | $7,165 | $10,465 | | Total | $351,889 | $405,997 | - As of March 31, 2024, the company had $40.8 million outstanding under its Amended and Restated Credit Facility and was in compliance with all financial covenants37 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, attributing revenue decline to macroeconomic uncertainty, covering segment performance, margins, liquidity, and non-GAAP measures Executive Summary & Business Overview This summary highlights Q1 2024's revenue and net income declines, primarily due to macroeconomic uncertainty, despite capital returns to shareholders - Total revenue for Q1 2024 decreased 13.3% year-over-year to $351.9 million, with Technology revenue down 11.7% and FA revenue down 27.6%45 - Net income for Q1 2024 decreased 32.2% year-over-year to $11.0 million, or $0.58 per share45 - The company's results are being negatively impacted by ongoing macroeconomic uncertainty, including inflation, interest rate levels, and geopolitical concerns47 Results of Operations This section details Q1 2024 operating results, showing revenue decline across Flex and Direct Hire, with gross profit margin contraction and increased SG&A Revenue Change | Revenue Change (Q1 2024 vs Q1 2023) | % Change | | :--- | :--- | | Total Technology revenue | (11.7)% | | Total FA revenue | (27.6)% | | Total Flex revenue | (12.8)% | | Total Direct Hire revenue | (31.5)% | | Total Revenue | (13.3)% | - The total gross profit percentage decreased by 100 basis points year-over-year to 27.1%, mainly due to a decline in the mix of Direct Hire revenue and lower Technology Flex gross profit margins56 - Technology Flex gross profit margins decreased 60 basis points year-over-year due to a tighter pricing environment, with management expecting sequential increases in Q2 2024 due to lower seasonal payroll taxes59 - SG&A expenses as a percentage of revenue increased 20 basis points year-over-year to 22.2%, reflecting SG&A deleverage as the company retains productive associates despite lower revenue levels60 Non-GAAP Financial Measures The company presents non-GAAP measures like Free Cash Flow and Adjusted EBITDA, which both declined in Q1 2024, for insight into performance and core profitability Free Cash Flow | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,169 | $19,056 | | Capital expenditures | $(1,875) | $(1,872) | | Free cash flow | $11,294 | $17,184 | Adjusted EBITDA | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net income | $10,987 | $16,210 | | Adjusted EBITDA | $20,560 | $28,729 | Liquidity and Capital Resources Kforce's liquidity is supported by operating cash flows and its credit facility, continuing capital returns through dividends and increased stock repurchase authorization - As of March 31, 2024, Kforce had $40.8 million outstanding under its credit facility and borrowing availability of $158.2 million70 - During Q1 2024, the company paid $7.1 million in dividends ($0.38 per share) and repurchased approximately 29 thousand shares for $2.0 million7477 - In February 2024, the Board of Directors increased the stock repurchase authorization to a total of $100.0 million, with $98.0 million remaining available as of March 31, 202477 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's quantitative and qualitative disclosures about market risk since the 2023 Annual Report on Form 10-K - There have been no material changes to the information regarding market risk previously disclosed in the company's 2023 Annual Report on Form 10-K81 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective82 - No changes occurred in the company's internal control over financial reporting during the first quarter of 2024 that are likely to materially affect it83 PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, which are not expected to materially affect its consolidated financial statements - Kforce is involved in legal proceedings arising in the ordinary course of business, which are not expected to have a material effect on its financial statements88 Item 1A. Risk Factors No material changes occurred in the company's risk factors from those previously disclosed in the 2023 Annual Report on Form 10-K - There have been no material changes in the risk factors previously disclosed in the 2023 Annual Report on Form 10-K89 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details Q1 2024 common stock repurchases and the Board's increased stock repurchase authorization, with $98.0 million remaining Stock Repurchases | Period (2024) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January | — | $— | | February | 1,854 | $69.18 | | March | 28,640 | $69.84 | | Total | 30,494 | $69.80 | - In February 2024, the Board of Directors increased the stock repurchase authorization to $100.0 million; as of March 31, 2024, approximately $98.0 million remained available under the plan9190 Other Items (3, 4, 5) This section confirms no defaults on senior securities, no mine safety disclosures, and no new or terminated insider trading arrangements during the quarter - The company reported no defaults upon senior securities, no mine safety disclosures, and no new or terminated Rule 10b5-1 trading plans by officers or directors during the quarter929394 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO and CFO certifications - The report includes a list of filed exhibits, notably the CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act95
Kforce(KFRC) - 2024 Q1 - Quarterly Report